Future alimony negotiations become more challenging. Previously, alimony was treated as taxable income to the recipient and therefore tax deductible to the payer. Beginning in 2019 under the new Act, alimony is no longer a tax-deductible item on the federal tax return. Therefore, the recipient will no longer be required to pay income tax and … Continued
Medical deductions are retained and enhanced. Taxpayers who itemized their deductions prior to the Tax Cuts and Jobs Act of 2017 had the ability to deduct their out-of-pocket medical expenses that exceeded the amount equal to 10% of their adjusted gross income (AGI). The deduction applied to qualified costs on expenses for diagnosis, cure, mitigation, … Continued
Many small write-offs have lost their deductibility although under previous AMT laws, their benefits were phased out anyway. Previously, individual taxpayers who itemized their deductions rather than claiming the standard deduction have enjoyed the ability to deduct miscellaneous expenses that, when combined, exceeded 2% of their adjusted gross income (AGI). This unassuming catch-all category covered … Continued
In the new tax law, there’s no going back (on Roth Conversions). As a result of the new legislation, taxpayers are no longer able to “recharacterize”, or undo, a previously executed Roth conversion. Roth conversions allow for an individual to convert some, or all, of an Individual Retirement Account (IRA) into a Roth IRA, subjecting … Continued
The Qualified Charitable Distribution (QCD) remains permanent. Qualified Charitable Distributions (QCD) were made permanent by the Protecting Americans from Tax Hikes (PATH) Act of 2015 and were untouched by this new tax overhaul. IRA owners age 70½ or older can distribute up to $100,000 per year from their IRA directly to charitable organizations. These distributions … Continued
529 plans can now be used to fund up to $10,000 of private school tuition per year. 529 plans are funded with after-tax dollars, but then all income and gains are sheltered within the plan over time, and withdrawals are free of both federal and state tax as long as the proceeds are used for … Continued
Funds within 529 accounts can be transferred to 529 ABLE accounts for people who become blind or disabled before age 26. 529 ABLE accounts are available to those who become blind or disabled before age 26. Importantly, having assets in a 529 ABLE account does not limit the person’s access to key government benefits such … Continued
The tax law changes the time frame for loan repayments from a 401(k). 401(k)’s were largely left alone in this new tax bill, which is a positive outcome for employees who contribute to their company 401(k) plans. The 2018 maximum contribution to a 401(k) plan remains at $18,500, plus a catch up of an additional … Continued
Owners of pass-through businesses get a break – but it’s complicated. Beginning in 2018, a new 20% deduction for qualified business income will be available. This will effectively lower the top tax rate of small business owners from the highest new personal income tax rate of 37% to about 30%. This was a partial concession … Continued
The new tax law puts a cap on the amount of debt interest cost most companies can deduct. Interest payments have long been deductible for companies, but the new tax law now limits such deductibility to 30% of the company’s EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization). This will effectively reduce the incentive for … Continued